Doomsday and Why America Should Not Default

March 14, 2011 06:12

The problem of American debt can no longer be passed to the next administration.  America lives on borrowed time, and time is not as forgiving as the Chinese.

By John Griffing at American Thinker

America nears the brink of financial collapse.  If action is not taken to reduce American debt, a tidal wave — called the “doomsday scenario” by economists — will consume American economic power, effectively ending American preeminence.

Over the next decade, interest payments to foreign creditors will account for 80 percent of the debt added, meaning that less money can be spent on the programs demanded by citizens.  Now that American debt is 100 percent of GDP, America will not be able to credibly incur new debt.  And if America is not able to pay, foreign creditors will no longer have any reason to continue funding American indebtedness.

Doomsday is closer than many would care to admit.  Net federal liabilities currently exceed $100 trillion.  World GDP hovers around $58 trillion.  Planned U.S. spending exceeds world GDP.  The implications of these staggering levels of spending are obvious: such decadence can never be paid for.  If owners of U.S. debt demanded the principal, instead of interest, America would cease to function as an economic entity.  In short, American global power would be virtually gone.

For perspective, consider that the Chinese are requesting ownership of U.S. infrastructure as collateral on future loans.  Presumably, if America is unable to “pay up,” public roads and buildings will become Chinese property.  China is already the only supplier of the rare-earth magnets used in U.S. bombs.


Help Make A Difference By Sharing These Articles On Facebook, Twitter And Elsewhere:

Interested In Further Reading? Click Here